GE’s code of ethical conduct under test

It’s the world’s most admired corporation. It’s one of the most successful and one of the best managed. General Electric (GE) is also rated the most respected company in the world in terms of corporate governance, according to a 2004 global poll of CEOs conducted by the Financial Times and PricewaterhouseCoopers.

In many ways, many of us have had high hopes that GE’s involvement with Thailand would be good for the country. And it has been. GE is today one of largest foreign investors here, with investments of more than US$1 billion (Bt40 billion) in silicone manufacturing, plastics compounding, medical systems, financial services, and the production of jet engine components and support services.

And if Thailand’s business community and opinion leaders have so far taken a balanced and fair view of the US giant, GE can surely rely on the goodwill it has built up, particularly in times of threat to its Thai operations. The company has had its fair share of turbulence over the past 30 years of its expanding commercial relations with the Kingdom.

Some might recall an incident in the 1990s during the tenure of former prime minister Chatichai Choonhavan. His young advisers, known as the Baan Phitsanulok clan, accused the then management of Thai Airways International of colluding with GE, which was supplying engines for most of the carrier’s aircraft. The advisers – among them Pansak Vinyuratn (now Prime Minister Thaksin Shinawatra’s chief policy strategist), Surakiart Sathirathai (now deputy prime minister) and Kraisak Chonhavan (Chatichai’s son and now an active member of the Senate) – forced THAI to start buying aircraft engines from other makers, including Pratt and Whitney.

Those in the public who were following the issue at the time, particularly large sections of the travel industry, sympathised with THAI’s management, which argued that GE was the best choice for supplying engines given the amount of time, money, facilities and maintenance staff the company had invested in Thailand. Switching to another engine brand would only lead to higher costs, they said.

At the time, Baan Phitsanulok’s desire to break the GE monopoly on supplying aircraft parts was understandable enough, but the practicality of using GE engines and the company’s reputation for reliability and cost benefit to THAI were arguments that were hard to challenge. GE’s status as the main engine supplier to THAI continues until this day.

The next milestone in GE’s Thai history came when it appointed former prime minister Anand Panyarachun to its advisory board for the Asia Pacific in the mid-1990s. The move was seen as a win-win situation. GE, then under the stewardship of CEO Jack Welsh, was really taking off. The company couldn’t have picked a better person than Anand in terms of its public relations here. But the biggest turbulence came after the 1997 financial crisis. GE Financial Services, the company’s star earner, was at the height of its international business expansion. The crisis gave it an opportunity to grab a foothold in the collapsing Thai market. However, Wall Street investment banks, critics and opposition politicians decried the so-called “fire sale” of indebted Thai assets carried out by the company. The leader of the Thai Rak Thai party, Thaksin Shinawatra, made an emotional nationalistic appeal against foreign buyers of Thai assets.

If GE were a bad company, it wouldn’t have survived the ordeal. However, it started working with Bank of Audyhya and Central Department Store and established a finance firm, harbouring ambitions of turning it into a bank. This takes more than just character and determination. The company deftly and quietly shored up its public support, steering its way through the highly politicised time. And it succeeded.

Today, GE faces another test in the form of the full-blown scandal surrounding the purchase of equipment for the new Bangkok international airport. It should be noted that it is not GE that is to blame, but the firm it took over, InVision Technologies Inc, which violated the US Foreign Corruption Practices Act (FCPA).

GE’s role in this has always conformed to its much-admired Ethical Code of Conduct. As the company states in an official report, “We have banned bribery in all commercial settings outside the US, not just to foreign government officials as required by the Foreign Corrupt Practices Act (and we, of course, have this ban in the US as well).

“We now have a strong presumption against ‘facilitating payments’ allowed under the FCPA but questionable under local law – and special processes for reviewing requests for such payments.

“Our non-discrimination provisions apply to all GE employees around the world, not just to US citizens. When we qualify suppliers, they must not only meet technical and quality standards but also ethical ones involving such issues as child labour, prison labour, environmental health and safety, wages and working conditions, even though we may have no legal duty to inquire into these matters.”

And yet, for all its good deeds, reputation and history, GE’s flattering letter to the Thai government on May 12 came as something of an anti-climax and a disappointment. We don’t have to say why!

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